IMF asks central banks to ignore optimism about falling inflation

He International Monetary Fund (IMF) warned this Tuesday against the optimism of those who believe that the fight against inflation is reaching the end of the road and asked central banks to remain vigilant, since the risks, although they have decreased, still persist on the horizon.

“There will likely be obstacles along this last mile. Geopolitical tensions could intensify and weigh on investor sentiments“, said Tobias Adriandirector of Monetary and Capital Markets of the IMFon the occasion of the publication of the Global Financial Stability report.

This document, which evaluates the main vulnerabilities to which the global financial system is exposed, points out that although in the medium term the risks have been reduced, there are still concerns that force us to be vigilant, such as the significant indebtedness of the public and private sectors in many countries, despite the fact that economic growth “surely it won’t speed up”.

The publication of this report coincides with the launch of the global economic outlook, where global GDP growth is expected to reach 3.2% this year and next, an advance of one tenth compared to last January’s forecast in the first case. , and without changes in the second.

The IMF points out that “There is recent evidence that disinflation may have stalled in some countries” and that underlying inflation may be persistent in some sectors.

Furthermore, in many of the main economies the IMF has increased inflation expectations for the current year and the next.

The consumer price index exceeds the 2% target in 2024 in countries such as Brazil (4.1%), Mexico (4%), the United States (2.9%), Spain (2.7%), the United Kingdom (2.5%) or France and Germany (both 2.4%), among others.

The IMF also warns that an increase in geopolitical tensions, in the midst of war in Ukraine and Gaza and after Iran’s recent attack on Israel, could further disrupt shipping and energy production and thus increase inflation.

This scenario could lead to a tightening of financial conditions and especially affect emerging market borrowers, who are often the ones who are negatively affected.disproportionate” in this situations.

For the economic organization, which is releasing this report coinciding with this week’s spring meetings with the World Bank (WB), central banks should not opt ​​for premature monetary easing to avoid having to take a step back later.

This line coincides with that expressed by the US Federal Reserve, which in its various meetings has made it clear that before lowering rates it wants greater confidence that inflation is moving solidly towards the 2% objective.

From the IMF is asked “counteract overly optimistic opinions” regarding the flexibility of monetary policy, but it is also invited to adopt a less restrictive policy if conditions allow it.

“Preserving financial stability across the last mile requires a multi-pronged approach“, points out Tobias Adrianwhich calls on regulators to take steps to ensure that banks and other institutions can withstand defaults and other risks, such as using stress tests.

The institution insists that the central banks They should ensure that retail banks have access to liquidity facilities when necessary and be prepared to intervene early to address funding stresses in the financial sector.